Global Insight Perspective | |
Significance | The world's number-one handset maker has announced seven new basic handsets priced below 100 euro (US$136), which will be shipped to select markets in the second and third quarters. |
Implications | Nokia's new handsets are aimed at emerging market consumers, delivering a number of new features—like digital cameras and Bluetooth technology—to the entry-level market. |
Outlook | New releases in Nokia's entry-level portfolio signal that the Finnish handset vendor is as serious about retaining its position as the world's leading supplier in the low-end segment as it is about developing its feature-rich premium multimedia-heavy N-series and the business-oriented E-series. |
Nokia has launched seven low-end mobile handsets at an event in New Delhi, India, which will retail at estimated prices of between 35-90 euro, before applicable taxes and subsidies.
- The basic Nokia 1200 and Nokia 1208 include a call-duration tracking feature, which helps consumers manage airtime costs by enabling them to preset a time or cost limit on individual calls, which will automatically end the call after the limit has been reached. Both models feature multi-user phonebooks, enabling handsets to be shared by family members. The Nokia 1200, which features a monochrome screen, will be available in the second quarter at an estimated retail price of 35 euro, while the Nokia 1208 which features a colour VGA screen will be shipped in the third quarter retailing at 40 euro.
- The entry-level Nokia 1650 is also equipped with the call-duration tracking feature, as well as with a flashlight, FM radio and MP3-grade ringtones. It will be available in the second quarter at 55 euro.
- The Nokia 2660 features GPRS connectivity for e-mail and internet access, Bluetooth, FM radio, MP3 ringtones and a 500-entry phonebook. It will be available in the second quarter, priced at around 85 euro.
- The Nokia 2630 features a digital camera combined with Bluetooth technology, which allows images to be sent, shared, stored and printed, as well as email, MMS, calendar, calculator and FM radio. It is 9.9 mm thin, the thinnest handset in Nokia's portfolio. The Nokia 2630 will be available in the third quarter at 85 euro.
- In addition to a digital camera and Bluetooth technology, the Nokia 2760 features video recording, video playback, and FM radio, as well as GPRS for internet connectivity. It also features 1000-entry phonebook. The Nokia 2760 model will be available in the third quarter, retailing at 90 euro.
- The Nokia 2505 is a CDMA phone and is expected to be available in selected markets in Asia-Pacific, Middle East, Africa, China and Latin America during the second quarter
Outlook and Implications
Attractive and Affordable: By embedding new features like imaging, Bluetooth and GPRS connectivity, combined with a stylish design in the Nokia 2630 and Nokia 2760, the Finnish vendor aims to make its basic handsets not only affordable but also attractive to the entry-level market. In addition, by combining a digital camera with Bluetooth technology, Nokia introduces its entry-level consumers in the emerging markets to sharing user-generated content on the go, which is consistent with the global mobile Web 2.0 trend. Nokia expects that FM radio, plus direct-access shortcut keys and MP3 ringtones, are designed to satisfy the entertainment side, while email, MMS, a calendar, an extended phonebook and a calculator cater for the work-related demands.
Emerging Markets: The new low-end portfolio will enable Nokia to reinforce its leading position in emerging markets. According to Nokia, its entry-level 1100 model and its models in the 1100 family (1101, 1108, 1110, 1110i, 1112) had surpassed the 200 million-unit milestone, which indicates sales of more than a million phones a week. The new revised basic portfolio signals that Nokia is ready to capitalise on the dynamically growing emerging markets. The entry-level handsets still account for a large proportion of Nokia's sales. Last year, the Finnish vendor shipped 146 million phones retailing at below 50 euro, more than double the previous year, representing 42% of its total units sold. Nokia sold a total of 347 million handsets in 2006. According to the company's estimates, the global handset market will grow by approximately 10% this year, which equates to sales of 1.08 billion handsets, against 978 million shipped in 2006 (see World: 28 March 2007:Q4 2006 Mobile Handset Update).
Cost Control: Nokia, however, anticipates the increasing impact of the emerging markets on a continued decline in the industry average selling price (ASP) of a handset. Already in the first quarter of this year, a higher proportion of entry-level phones due to strong sales in the emerging markets contributed to a decline in the ASP per handset to 89 euro, against 103 euro a year earlier (see World: 20 April 2007: Nokia Ends Q1 with Stronger Margins Despite 6.6% Y/Y Decline in Net Profit). The company operates on handset operating margin of 16.8% as of the end of March 2007 and considers cost control to be a crucial part of its strategy. The large volumes of entry-level handsets enable Nokia to create cost synergies along the supply chain. In addition, the company only outsourced 23% of its total production last year, with in-house manufacturing being key to its efficient cost control. For comparison, according to a report in Reuters, the world's number-two player, Motorola, outsourced 41% of its handset production in 2006, with Sony Ericsson’s statistic standing at 66%.